Teva Pharmaceuticals has launched a significant restructuring program that will involve cost cutting equivalent to 18.6% of its current cost base by the end of 2019. The move will include “substantial optimization of the generic (drug) portfolio globally” including price rises and product terminations in the U.S. That follows a price-deflation led profit warnings from the company, as well as disappointing announcements from competitors including Mylan and Dr. Reddy’s as outlined in Panjiva research of August 16.
Panjiva data shows that Teva’s seaborne exports to the U.S. of generic drugs and precursors have fallen 13.1% on a year earlier in the three months to November 30 and by 33.3% since the second quarter.
Source: Panjiva
The pricing pressure in the U.S. drugs market can be seen in average import values per gram, which fell 19.1% on a year earlier in October. That marked the 15th straight month of decline, though a 19.6% rise in volumes the lower prices are drawing more demand into the market at the same time.
Source: Panjiva
The drop in average import values has been broad based. Cardiovascular drugs (including statins) having seen a 33.8% drop in the past three months on a year earlier, antidepressants a 16.5% decline and even the normally robust oncology sector having seen a 3.3% decline. A rare outlier has been anticonvulsants which climbed 82.4%, though the comparison period includes an abnormally low result for August 2016.
Source: Panjiva
The restructuring is clearly welcome – the company’s stock price rose 12% on the news. The plan nominally allows for the closure of manufacturing facilities in both Europe and Israel.
Reuters reports that Prime Minister Benjamin Netanyahu has asked the company (which is headquartered in Jerusalem) to minimize job cuts there. In the past 12 months 26.8% of Teva’s U.S. shipments came from Israel with 18.2% from Croatia and 13.5% from Ireland. Facilities in the latter two may face pressure to close before those in Israel if the company agrees to the Prime Minister’s request.
Source: Panjiva